- Financial Advice, Mortgage, Home, "Financial Education"
- December 10, 2020
- FCU Team
The white picket fence. The big yard. The privacy you crave. Home ownership is a significant milestone many dream of as they make their way through adulthood. But are you financially fit to purchase and own a home? And even if you are, does it make sense for you in your current stage in life?
What Can You Afford?
The #1 determinant of the rent vs. buy debate is whether you can afford to purchase and maintain a home. The first major expense is usually the down payment, where you pay a portion of the sale price upfront. It’s generally accepted that the more money you put down at this stage, the better off you’ll be in the long run since the rest will be covered by a mortgage. More money upfront also means a lower monthly payment.
Overall, here's a summary of costs you might have to incur before you move in and begin your monthly payments:
- Escrow (typically for property taxes and home insurance)
- Closing costs
- Inspection and appraisal
- Title search and property survey
The costs don’t end there, however. Some financial analysts call houses money sinks, and it’s not difficult to see why. Keeping a home in good condition for years, if not decades, can be a drain on your resources. There’s also the chance that your initial home inspections did not reveal problems that may present themselves shortly after moving in. Depending on the severity of the issue, dealing with these problems might eat up a significant amount of money.
Upkeep is of utmost importance if your plan to sell the house down the road. The market of people who want to buy a fixer upper is smaller than those who want a near-perfect house!
You should also consider that mortgages are good debt. Paying on time every single month demonstrates you're able to pay your debts, meaning your credit score will see a positive impact over time. While a positive rent paying history does look good on your credit report, the effect is not as significant as you'd be getting with a mortgage.
So before you start looking, ask yourself a simple question: Am I able to shoulder these costs on top of my monthly mortgage payments? If the answer is no, it may be unrealistic to buy a house at this time. Your best option could be to rent, at the very least until you’re in a place where you can shoot for a house.
Curious about what you could afford? Check out our buy vs. rent calculator here.
Where Will You Be in a Few Years?
It’s likely someone has asked you where you see yourself in five years, whether in a job interview, casual conversation, or a blog post by your favorite credit union. So…where do you see yourself in five (or ten) years?
Do you plan to stay in your area for the foreseeable future? Do you have a blossoming family? Do you have career aspirations that you could see taking you across the country or the globe?
The process of selling a home can be just as involved as its purchase, especially if the housing market in your area is in a down period. Many fail to realize that a home is as much a financial investment, as one of time. When you purchase a home, the message you’re sending is that you’re there to stay for some time!
Obviously, this doesn’t mean you’re staying for the rest of your life; many people will stay in a home for a period of time and then upgrade to another, sometimes even in the same neighborhood or town.
What King of Lifestyle Do You Seek?
Many have argued that buying and owning a home is a lifestyle choice above all things. Whether or not you agree, it’s a compelling thought. When you own a home, it’s almost as if you’re your own boss. You make all the decisions, but ultimately the general upkeep that comes with owning a house is your responsibility.
On the other hand, renting is kind of like working a job. You have the security of a home, but you’re answering to someone else in the form of rent and whatever rules they impose. This does stifle your ability to make significant changes, which in turn can hurt your ability to make a space truly yours. There are benefits, of course! Your landlord or property owner is responsible for things you’d normally have to do if it was your home, like landscaping duties or repairing and replacing appliances.
Renting also allows you more movement flexibility. As we’ve mentioned, selling a house can be a long process. If you’re renting, you can easily wait until the end of a lease for a clean break. Renting can also be an opportunity to scope an area out. For example, if you’ve moved somewhere new and are uncertain about the area, renting provides you the ability to get a sense of what you like and dislike.
On the flipside, buying a house offers stability unlike any other, as you are the King/Queen of your castle. A significant source of anxiety for renters comes when their lease is near its end, as they have to decide whether or not to sign up for another period or have to endure a move to somewhere else. You’re also at the mercy of your proprietor, as rent might stay the same or increase.
Depending on where you’re renting, you may also have to deal with annoying neighbors. While homeowners aren’t immune to neighborhood disputes, many have to rent apartments for affordability and location reasons. Any college-aged millennial can tell you that apartment living can certainly have its difficulties when it comes to noise. As a homeowner, it is less likely you’ll have to worry about any of these things in a permanent and private homestead!
Both options provide a different kind of freedom, and it’s up to you to decide which one you want/are ready for!
Home Buyers Welcome
If you’re looking to take the leap, let us come along for the ride! Florida Credit Union offers a myriad of mortgage and financing options for those looking to jumpstart their home search. If you’re a first-time buyer (or need a refresher), check out our guide for first timers below, which covers all the steps in the buying process. For a complete overview of what steps you should be taking, check out our Home Ownership Toolkit and our Road to Home Ownership guide.
Florida Credit Union is a full-service financial institution. Founded in 1954 as the Alachua County Teachers’ Credit Union, FCU now services over 113,000 members in 45 counties throughout North and Central Florida. For more information on the services we provide, visit FLCU.org or call us at 1-800-284-1144.